Shareholders OK sale of Puget Energy

U.S., state agencies' approval needed

By BILL VIRGIN, P-I REPORTER

Updated 10:00 pm, Wednesday, April 16, 2008

Puget Energy Inc. shareholders overwhelmingly approved on Wednesday the sale of the Bellevue-based electric and natural gas utility to an Australian-Canadian investment consortium, the first hurdle to be cleared for a $3.5 billion deal that also needs the endorsement of federal and state regulators.

At what may have been the last shareholders meeting for the company, Puget said that of all the shares that were voted, 97 percent were voted in favor of the sale. The deal needed the approval of at least two-thirds of shares outstanding; since 81 percent of all shares were voted, that would suggest an overall approval rate of 79 percent.

The other major hurdle for the deal is approval by the state Utilities and Transportation Commission, which plans to hold public-comment hearings in late May and early June, and formal hearings in late July. Puget is hoping for a commission decision by early September. Several federal agencies also have to weigh in.

Shareholder William Liedle agreed that the proposed sale is "a wonderful deal for the acquiring consortium," but questioned how good it is for existing shareholders. While the new owners will get a utility in an economically healthy region, "We don't get our dividend, we don't get to participate in the (future) profits," he said.

Capital-gains taxes will take a bite out of what money shareholders do get, and many won't find new investments that deliver the same returns they had been getting with Puget, he added.

"We should have gotten more for this company," Liedle said. "We should not have sold it."

But Puget Energy Chief Executive Steve Reynolds said management's analysis of Puget's prospects didn't suggest that the stock would reach the $30 level any time soon and, in the meantime, Puget needs the capital the investment consortium can provide for replacing pipes and wires, building new facilities to accommodate growth and investing in renewable-energy generating resources such as wind power.

Another shareholder noted that the result of many mergers is that management cashes in and retires comfortably, but employees get laid off.

"This transaction is not intended to do anything other than to add to the strength of the company," Reynolds said, adding that top executives, including him, have committed to staying beyond the close of the acquisition, and that the deal should bring security for employees and retirees.

Christopher Leslie, chief executive of Macquarie Infrastructure Partners, said the investors don't plan major changes in Puget's operations, nor are they looking to quickly cash out. He also noted Macquarie's ownership of utilities in the U.S. and abroad. "We're not just bankers pretending they know how to run utilities," he said.

Puget stock closed at $26.39 a share Wednesday. Asked by a shareholder why the stock price was trading so far off the proposed purchase price, Reynolds said, "There's always some uncertainty with regard to any transaction."